EU fund managers bring back commission sharing

By Vriti Gothi

Europe’s asset managers are moving decisively back to Commission Sharing Arrangements (CSAs), signalling a significant reversal of the MiFID II era as regulators ease restrictions on how firms pay for investment research.

The reversal in approach has been driven in large part by updated rules from the UK Financial Conduct Authority (FCA), which came into effect last year to boost the competitiveness and vibrancy of the domestic investment research market. The FCA’s new framework grants asset managers greater flexibility in how they allocate and recover research costs, lifting the strict fund-level budgeting requirements that many firms viewed as administratively burdensome and misaligned with global norms.

According to a new industry-wide survey covering asset managers globally, representing a combined $13 trillion in assets under management, 87% of respondents expect at least half of all research budgets to be client-funded within the next two years. This marks a significant shift in sentiment across the European buy-side community and points to what could be the most substantial recalibration of research payment structures since MiFID II transformed the market nearly a decade ago.

Under the revised policy, managers can now adopt strategy-level or firm-level budgeting approaches for research payments, aligning the UK more closely with established practices in the United States. This shift has been welcomed by asset managers, many of whom struggled under MiFID II’s unbundling regime to balance compliance with the practicalities of funding high-quality research to inform investment decisions.

Sentiment across the buy side has shifted markedly. Earlier apprehensions about the operational complexities of re-bundling research and execution costs through CSAs have given way to a widespread belief that the new rules are workable in practice. A growing majority of firms now believe that the flexibility offered under the updated framework provides them with a competitive edge and strengthens their ability to access differentiated research insights, which are critical for delivering alpha in increasingly complex markets.

Industry leaders see this pivot as more than just a local policy tweak — many believe it represents an important step towards greater regulatory harmonisation between the UK, EU and US markets. By removing inconsistencies that arose under MiFID II’s rigid approach, the industry hopes to streamline global operations and level the playing field for European managers competing internationally.

Experts note that the renewed freedom to adopt CSA-funded research is reshaping attitudes towards unbundling across Europe. With asset managers increasingly convinced that the strategic benefits to their research capabilities and cost structures outweigh previous concerns, CSAs are now widely expected to become the prevailing standard for research funding across the continent by the end of 2026.

This transition is seen as vital for reinvigorating the European research ecosystem, which has faced well-documented challenges since MiFID II dramatically reduced the size of the independent research market. Many smaller providers exited the market altogether, while buy-side firms often struggled to access the breadth and depth of insights they previously relied on. By reintroducing flexible funding mechanisms, industry stakeholders hope to unlock greater choice, innovation and quality across the research value chain.

As Europe’s asset managers adapt to this evolving regulatory landscape, many are re-evaluating their partnerships with research providers, brokers and technology platforms to ensure they are well-positioned to capitalise on the return of CSAs. Firms are expected to invest in more robust operational and compliance frameworks to manage client-funded research pools effectively, ensuring transparency and accountability while maximising the strategic value of their research spend.